Canadian Finance Minister Bill Morneau

Finance Minister Bill Morneau (pictured at an event in Washington, D.C., in October) delivered his fall fiscal update on Wednesday. (Getty Images/Bloomberg)

Canada | Economy

Fall fiscal update earmarks in excess of $17-billion in new spending over six years

The federal government opts to go deeper in deficit in a bid to bolster Canada’s competitiveness, the Fall Economic Statement reveals

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In a bid to address threats to corporate Canada’s competitiveness, the Liberal government will defer deficit reduction, instead spending billions to invest in the economy and accelerate business investment. 

The Fall Economic Statement, which was delivered by Finance Minister Bill Morneau on Nov. 21, will deliver in excess of $17-billion in new spending over six years.

This investment includes an Accelerated Investment Incentive—an accelerated capital cost allowance for businesses of all sizes, across all sectors of the economy that are making capital investments. Measures also include a new tax write-off allowing manufacturers to immediately deduct the costs of machinery and equipment, and immediate expensing for clean energy.

“Part of what contributed to widespread concern about Canada’s competitive position was efforts in the U.S. to lower the overall tax rate on new business investment,” said Francis Fong, CPA Canada’s chief economist. “Those measures were ultimately very costly. The federal government’s actions today are an attempt to both respond to those immediate pressures, while not completely ignoring their fiscal situation.”

While measures to reduce the competitiveness gap were expected, CPA Canada says more is needed to bolster competitiveness in the long-term.

“CPA Canada supports the federal government immediately addressing threats to Canada’s competitiveness through the new measures to accelerate business investment,” said Bruce Ball, CPA Canada’s vice-president of taxation. “However, these measures do not eliminate the need for a comprehensive review of the tax system. Such a review would help make the tax system simpler, fairer and more competitive.”

The government also introduced new ways at helping businesses grow, including establishing an External Advisory Committee on regulatory competitiveness.

While the government’s continued its commitment to reduce Canada’s debt-to-GDP ratio, the Fall Economic Statement provides no target for eliminating the deficit.

“Such action would provide guidance to the government in its economic planning and improve business confidence,” adds Ball.

Other key highlights include:

  • Two new tax credits worth $600-million over five years to support news organizations
  • Investing $800-million over five years into the strategic innovation fund, of which the forestry industry will get $100-million.
  • A new fund of $755-million available over 10 years for social finance, which would allow charities and non-profit groups to finance new ideas. The hope is to see $2-billion in economic activity and up to 100,000 jobs as a result.
  • Removing barriers to trade within Canada by working with provinces and territories to enable businesses to transport goods more easily, harmonize food regulations and inspections, and facilitate greater trade in alcohol.

The full statement can be found here.

FOR MORE

Learn why Canada is lagging internationally on tax reform with CPA Canada’s report, International Trends in Tax Reform: Canada is Losing Ground. Also, read CPA Canada’s tax review initiative aimed at encouraging a comprehensive review of Canada’s tax system.